Waiting for the better half

Just days after GDP report for the US was seen to be higher than expected at a contraction of 1 percent plus the unexpected massive support for the government’s cash-for-clunkers program which is on the verge of seeing an additional $2bn in funding in addition to the $1bn previously allocated, economists are following suit with upgrades of previous expectations of growth for the second half of the year. Some upward revisions for GDP growth:

UBS AG is now predicting 2.5% growth in the third quarter, up from 2%, and 3% growth in the fourth quarter, up from 2.5%. Wells Fargo & Co. also revised its third-quarter forecast to 3% growth, up from 2.2%. For the fourth quarter, it is now predicting 2.0%, up from 1.6%. T. Rowe Price Group Inc. increased its third-quarter projection to 2.75% from 1.3%.

Mark Zandi of Moody’s Economy.com is a little less positive with a third-quarter forecast of 1.6%, up from 1.1% while his Q4 GD figure is revised to 2.1% from a measley 0.2%.

My stance: I think there is a big chance that we’ll be getting the optimistic numbers predicted by the banks. With the big jump from the previous GDP number to the most recent’s 1.0% contraction, the success of cash-for-clunkers, and what I can only presume to be a smaller increase in job losses – all matched with improving economic data, it is not improbable for the US to meet or even surpass the expected GDP growth by the institutions cited above. Having said that, I’d be betting on growth north of 2% and not exceeding 2.75%. I think the 3% is just way too optimistic. We’re just almost through with one aspect of the crisis; there are more to come that are not yet in the numbers.